economic crisis / ecological change

Meet the reactionaries

Genesis of Neoliberal Informationalism

Let’s be clear from the start: the word “globalization” refers to the globalization of capital. No other force in society – church, state, military, or transnational organization – is so agile, so extensive and so powerful. Moreover, capital is an open system, whose agencies and operational routines are continually regenerated at the individual or microsocial level. Therefore it is exceptionally pervasive, and its instruments, rule sets, orientations and prohibitions reach deeply into all other institutions. This makes capitalism tendentially borderless and centerless. Its origins are everywhere. Its destiny has always been global. For exactly that reason the globalization of capital can and should be understood from a multiplicity of geographical locations, institutional contexts, class levels and subject positions. Only such a multiple, situated, and internally contradictory analysis could begin to help world populations confront the multi-facetted trap in which the invidious assemblage called “capital” has enclosed us.

In this text I will examine the globalization of capital from a set of largely American perspectives – particularly the most reactionary ones. Of course, this is not just one “viewpoint” among others. US industrial, commercial and financial interests, acting in concert with the state, the military and a number of key international organizations, sought deliberately to intensify the rhythm of transnational exchanges in order to regain power after the economic and social crisis of the Seventies. To do this, they gradually adopted a toolkit which became central to the subsequent phase of capital expansion: computers and networked communications. The most recognizable features of what may be called Neoliberal Informationalism derive from this set of “lead technologies,” which received military subsidy in the US in the Eighties and then became the object of a great transnational investment wave in the following decade. Yet capital, powerful as it is, always has to share its dynamic with other social forces. So we can ask: What needs did these technologies answer? How did they insert themselves into the fabric of society, beyond the strictly economic functions that they were conjured up to fulfill?

Social, cultural and political issues decisively affected the material and symbolic forms of the productive hegemony that arose in the US to replace Keynesian Fordism. The elite response to the turmoil of 1968 and of the ensuing decade shaped crucial aspects of the transnational redeployment of capital. What was absorbed from the struggles of the Seventies was a new kind of cross-class, cross-race populism, and a surprising attention to intersubjective and intercultural negotiation. I will suggest that this ideological expansionism arose from a position of weakness that could only temporarily be transformed into overpowering strength. Neoliberal Informationalism, in its two full-fledged business cycles from 1991 to 2001, then from 2003 to 2008, was the swan song of Liberal Empire. Today, as US hegemony unravels, it may be useful to examine the origins of certain traits that seemed, for a time, to be universal. The severity of the current crisis is such that, in restrospect, that time may appear short. To give another sense to the course of world development, and to escape the suicidal globality of capital, we need to undo these false universals and recover a multiplicity of other, more promising departure points.

Urgent questions

How to overcome stagflation and return to growth? How to stop inner-city rioting and campus dissent? How to restore the balance of trade and regain stability in the international environment? Production, social cohesion, world order. These were the key questions for anyone who sought influence over the US political economy during the long crisis of the Seventies. It was clear to public, private and military planners that the answers could not only be sought on a national level.

1968 had delivered a visceral shock to the elites across the earth. First, because the student protests were quasi-simultaneous and had global reach. Second, because they came in parallel to – and in some cases, together with – a new wave of working-class militancy, which continued unfolding for many years afterwards. Third, because their symbolism, tactics and ideologies had explicit links both to the riots in the American ghettos and the revolutionary movements in formerly colonized countries, such as Cuba, Algeria and Vietnam. Fourth, because the level of societal chaos in the US, combined with the quagmire in Indochina and the onset of the economic crisis of the Seventies, seemed to herald a decline in the US capacity for effective leadership. What appeared on the horizon for the most prescient observers was a shift from the relatively self-contained national societies of “embedded liberalism” to a new kind of global society, whose form of governance had yet to be invented.

The most agitated observations came from an American foreign-policy analyst and Cold Warrior aligned closely with the Democratic elites, Zbigniew Brzezinski, who was the author in 1970 of a book entitled Between Two Ages: America in the Technetronic Era. The meaning of his neologism is made clear in the first chapter, parts of which had already been published> in the CIA-funded anti-communist magazine Encounter in January of 1968:

While our immediate reality is being fragmented, global reality increasingly absorbs the individual, involves him, and even occasionally overwhelms him. The changes wrought by communications and computers make for an extraordinarily interwoven society whose members are in continuous and close audio­visual contact – constantly interacting, instantly sharing the most intense social experiences, and prompted to increased personal involvement in even the most distant problems…. > Instant communications are already creating something akin to a global nervous system…. Television has joined newspapers in expanding the immediate horizons of the viewer or reader to the point where “local” increasingly means “national,” and global affairs compete for attention on an unprecedented scale. Physical and moral immunity to “foreign” events cannot be very effectively maintained under circumstances in which there are both a growing intellectual awareness of global interdependence and the electronic intrusion of global events into the home.

The article published in early 1968 made much of this McLuhanesque understanding of an electronic nervous system, which undoubtedly appeared prophetic at the outbreak of the highly televised Tet Offensive (Jan. 28, 1968). Later that same year, however, the experience of a global youth and working-class revolution broadcast live across the planet lent greater urgency to the initial intuition. What Brzezinski does in the book is to use the events of 1968, which he obviously despises, as proof that the processes of technological change long underway in the United States have now become global conditions threatening the stability of governments throughout the Western world. On the one hand he is explicitly concerned with the “new class” of university educated technicians and managers that exercised everyone from the New Left to the Neocons. What would happen if their deep values, political orientations and professional actions began running counter to those of “free world capitalism”? Looking into the future he writes:

Within a few years the rebels in the more advanced countries who today have the most visibility will be joined by a new generation making its claim to power in government and business: a generation trained to reason logically; as accustomed to exploiting electronic aids to human reasoning as we have been to using machines to increase our own mobility; expressing itself in a language that functionally relates to these aids; accepting as routine managerial processes current innovations such as planning­-programming­-budgeting systems (PPBS) and the appearance in high business echelons of “top computer executives.” As the older elite defends what it considers not only its own vested interests but more basically its own way of life, the resulting clash could generate even more intense conceptual issues.

One the other hand, Brzezinski is equally concerned with the revolutionary upsurge of Black Power, which he sees as a model for unrest among Third World populations fascinated by the media spectacle of First World prosperity and crushed by an acute consciousness of stagnation and underdevelopment. “In American cities,” he continues, “the problem is not the absence of development or change; it stems from the perception by the poor that even rapid change will not change much for many in the near future, and from their growing realization that those who are richer are themselves becoming morally uneasy over the material gap. This combination of factors creates a sense of acute deprivation that results in intensified political hostility toward the outside world.” The heart of the problem therefore lay in the abandoned city centers of the US itself, where the implosion of Liberal Empire took its most concrete human form. Following the overall thrust of the book, he generalizes these political observations back to the Third World, and in this way discovers yet further problems posed by the “new class”:

In the United States “integration” has so far tended to mean the selective assimilation of a few individuals who can conform to the prevailing norms of the dominant community; however, their assimilation also means, the loss of talent and expertise to the black community, in which the less educated, more militant “pseudo­intelligentsia” increasingly provides charismatic leadership to the masses by exploiting reverse racism. In like manner, the established social elites of the Third World have tended to emulate the life styles of the more advanced world, and to emigrate into it either directly or vicariously…. The resulting vacuum is filled by an indigenous pseudo­intelligentsia, whose views are influenced by doctrines advocated by Frantz Fanon, Regis Debray, Che Guevara, and others. Nineteenth­century European Marxism, originally addressed to an urban proletariat only recently divorced from rural life, is romantically adapted to the conditions of industrially backward twentieth­-century global ghettos.

As the passage above makes clear, Brzezinski saw 1968 and its consequences as a basic challenge to the hegemonic intellectual and cultural order. He understood this challenge to result from a globalization of American social and cultural contradictions and a simultaneous internalization of Third World dilemmas by the US polity. At stake was the maintenance of an entire class hierarchy that had been forged during WWII with the resolution of the crisis of the 1930s, and had then been extended to the entire non-communist world. This hierarchy reduced the undeveloped and recently decolonized nations to the status of raw-materials markets in perpetual dependence on Western industrial goods, usurious bank loans and US “aid” and military support, all of which were now provoking revolutions. It’s interesting that the other developed nations – principally Western Europe and Japan – figure so little in Brzezinski’s analysis. Surely they too were embroiled in the crisis? Major changes in the international system were about to make that obvious.

In 1968, after Robert Kennedy’s assassination, Richard Nixon was elected on the strength of a violent voter reaction against the civil rights and antiwar movements. The Republican party deployed its so-called “Southern strategy.” It consisted in using racist law-and-order rhetoric along with the invocation of states’ rights to win the votes of former Democrats in the South, at the price of losing the few black votes that could still be garnered by the party of Abraham Lincoln. That strategy was a success. But Nixon inherited two major difficulties from the preceding liberal administrations, both of which derived from structural contradictions of the whole postwar period. The first was that American exports of basic mass manufactured products, including automobiles, had declined with the expansion of Fordist production to Western Europe and Japan. This had a strong negative impact on the US balance of trade, which had been positive throughout the Fifties and up to the early Sixties. As the the export of assembly-line manufactures declined, American corporations continued to ship sophisticated producer goods; and at the same time they set out strategically to acquire mass-manufacturing capacities abroad, thus contributing to the outflow of capital. In addition to this, the American state not only went on maintaining the huge overseas military presence that it had established during WWII, but also engaged in a series of expensive conflicts culminating in the Vietnam War. To fund on-the-ground expenses in those wars, the US would simply print its own money and spend it abroad, whether in the theater of hostilities itself, or in neighboring countries serving as supply lines. Therefore all those war dollars also flowed into the global economy and found their way back to the central banks of Western Europe and Japan.

The creditor countries, especially Germany and France, began to exercise their Bretton-Woods rights to convert dollars back into gold. This was payback for what they perceived as an abuse of the dollar’s role as global reserve currency. The result was something like a run on Fort Knox, depleting US gold stocks. There was also huge international pressure against the US trade deficit, because it meant that the value of the dollar tended to fall; and in order to prop up the dollar and keep it within the bounds of the Bretton Woods agreements, other countries were obliged to buy dollars themselves, although they had too many of them already. On May 9, 1971, this led Germany and the Netherlands to allow their currencies to float freely on the market. All that occurred in a context of rising inflation at home, which was permitted and encouraged by a very loose monetary policy (i.e. the Treasury just ran its presses in order to feed the wage-price spirals). The overall panorama smacked of bad economic times ahead, and in fact, the Republican party had already lost a lot of ground in the 1970 mid-terms, posing a major threat to the 1972 “campaign to re-elect the president” (or CREEP, as it came to be known). What would Nixon do?

As it turned out, he had a strategy – or rather, he accepted and implemented a strategy that had been proposed in bits and pieces by elements within both the government and the corporate sector. On August 15, 1971, Nixon closed the so-called “gold window,” suspending the convertibility of dollars into gold and thus abrogating the Bretton Woods treaty. This meant that all currencies would have to float against each other. He simultaneously placed unilateral tariffs on the import of certain goods in an effort to restore the balance of trade, as well as capital controls on the outflow of investment. However, these policies did nothing to improve the balance of trade. Instead, the removal of the tariffs became a bargaining chip in a much more complex monetary strategy, which was to force all other countries to let the value of their currencies rise, thus effecting a de facto devaluation of the dollar and wiping out a percentage of the dollar-value held by those countries. Such a plan implied a tremendous degree of brinksmanship. The US was effectively saying to its allies: “Either accept the solution we are unilaterally imposing, or exit from dollar, from trade relations with the US and from US military support.” This alternative can be put in even cruder terms: “Either accept a purely paper dollar, whose value is controlled arbitrarily by the US government, or we will crash the system.” The paper dollar was fact accepted, with great unwillingness and rancor, and it inaugurated the phase of monetary imperialism, or what Michael Hudson calls “super-imperialism.”

Brzezinski was a Democrat. Let’s try to grasp his persepctive on a world economy that changed fundamentally, under the opposite party’s management, in the course of only a few years. His book had been published in the wake of the political ferment of 1968, which on the international level would soon lead to the 1973 Egypt-Israel War. Meanwhile, however, whole new levels of financial chaos were being added to the system, involving precisely the kinds of communicational phenomena that the book had considered. In 1968, the first Internet nodes were connected. 1971 saw the invention of the microprocessor by researchers at Texas Instruments. The NASDAQ, National Association of Securities Dealers Automated Quotations, was founded that ssame year. 1972 saw the opening, at the Chicago Mercantile Exchange, of the first currency futures market, which international businessmen considered an essential tool for financial planning in a world of floating currency values. By that time the Black-Scholes formula, which was literally the mother of all derivatives, was already in use for complex option trading, even though the academic paper would only be published in 1973. In that year Reuters launched the first networked electronic price information system, called the Reuters Monitor, which was developed specifically for the currency markets. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) was also founded in 1973, and made operational by 1977. So the take-off of computerized finance began.

The world was awash in the money that Nixon had printed in order to secure short-lived prosperity and a false return to normal for the 1972 elections. Soon OPEC would be formed as a consequence of the Egypt-Israel War, petroleum prices would quadruple and a whole new capital circuit would arise to dominate the global political economy. This circuit linked the Arabian Peninsula to US engineering firms, so that the huge increases in prices at the pump for the American consumer could be transformed into new, more efficient extraction operations in the desert, along with gleaming new technological cities for the sheiks. More broadly, it linked the surplus income of resource-extracting countries in the Third World to Western banks, which would recycle their excess dollars as loans to other Asian, African and Latin American countries, creating debt dependency and the payments crisis of the early ‘80s. All of this was in germ by 1972, and the sophisticated East Coast liberal establishment that had controlled American policy since the Great Depression was out of power and sitting on the sidelines watching a paranoid strongman take control of national policy. What were their most urgent questions? And what did they intend to do?

Brzezinski’s response was to ally himself with an immensely wealthy and politically powerful figure, David Rockefeller, who at the time was chairman of the board at the Council on Foreign Relations. Together they set up a new transnational institution called the Trilateral Commission, officially launched in July of 1973. Rather than a think-tank or a simple variation on the ubiquitous chamber of commerce, the Commission was to be an elite coordinating institution at the philosophical level, drawing over 300 members from North America, Western Europe and Japan. The list included former politicians, corporate and financial leaders, high-level administrators, academics and religious leaders – in other words, a representative selection of elites from the three dominant currency blocs of the US dollar, the German mark and the Japanese yen. This institution was and still is too large and transparent to be called a conspiracy, and besides, a good deal of its work has now been made freely available to the public on the website. In fact it’s more shocking than a simple conspiracy. It is an ad-hoc, corporate-funded organ of transnational governance, explicitly designed to extend and supplement the declining US hegemony through an integration of the other two major poles of the world economy into the overall governing framework. In this way the Trilateral represents a unified response to corporate needs for monetary, industrial, diplomatic and military planning at the global scale. But instead of operating unilaterally out of a power center like the US Department of State (which had been the decisive focus of the Council on Foreign Relations during and after WWII), the founding of the Trilateral Commission meant that corporate power would henceforth be expressed through a communicational apparatus designed for continuous informal negotiation, under the fluctuating pressures of events, but also of a floating currency regime which was in the process of developing into a global 24-hour real-time financial system. As one can read in a 1973 publication entitled “The Crisis of International Cooperation”: “Simply stated, the problem is a structural one. The international system, which depended heavily on U.S. leadership and sustenance, now requires a truly common management to which North America, the European Community and Japan must – in view of their large economic power – make a special contribution.” The response to the crisis, in other words, was a change of world order.

This change in scale and structure between the WWII regime and the crisis of the 1970s is fundamental. It signifies an epocal shift – the transition between two long waves of the world-economy. In this context, the Trilateral Commission should be interpreted as a long-lasting and particularly explicit feature of a broader attempt to reconstruct a capitalist hegemony under radically new conditions. Part of the difference was organizational and technological: pervasive global telephony and the advent of satellite communications enabled the coordination of global supply chains using standardized containers, with flow-chart routines developed for the war in Vietnam. Capital could therefore address labor and environmental protest in its historic centers by shifting production to special export zones on the periphery, thereby constituting what observers of the time called “the new international division of labor.” Similarly, communications enabled the continuous trading of currency futures and other complex options to smooth out the transnational money flows required for these far-flung industrial and marketing operations. Underlying the techno-organizational change, however, there was a basic political need to find a pattern of governance that would have to accomplish two very different goals. It would have to allow for an extended cooperation among global elites, while at the same time restructuring the subjectivity of the professional and managerial classes, not only in the US but also in the other two main poles of the world-system. It would have to restore the capacity of the professional-managerial classses to believe in the system, so that they could rise to the challenge of administering the new kinds of finance-led hi-tech development that were about to begin unfolding around the world. This was the subjective challenge of the Seventies.

The problem was that the global middle classes were not ready to assume their new administrative roles. Thinkers on the left had analyzed how the economic slump was deepened and rendered far more intractable by a crisis of legitimacy affecting people’s belief in the validity of the capitalist system. This view was developed in the US by James O’Connor in his book The Fiscal Crisis of the State in 1973, and in Germany that same year by Jurgen Habermas in Legitimation Crisis. The “best and the brightest” no longer wanted to find themselves working on the management of the Vietnam War. Instead they joined campaigns for racial equality, economic democracy, environmental justice and a “New International Economic Order” between North and South, bringing the radicals of the core countries togther with Third World revolutionaries in a bid for international leftist hegemony. Such coalitions demanded an institutional response. As Boltanski and Chiapello observe in their study of the ideological formation that emerged from the crisis of the Seventies, “the capitalist class as a whole has an interest – especially where cadres [ie managers] are concerned – in overall measures that make it possible to retain the commitment of those on whom profit creation depends.” The organization of such “overall measures” represents a grand strategy for exit from a major crisis of capitalism.

In 1976, Jimmy Carter was elected on a progressive Democratic platform designed to recapture the disaffected members of the “new class” in the US and throughout the world. His government included twenty-seven members of the Trilateral Commission, with Brzezinski as National Security Advisor in replacement of the dark Henry Kissinger. After the rupture of 1968-73, the movement of re-absorption would begin. Rather than an international left hegemony, what ultimately emerged through the oscillations of the American political system was a fusion of left and right libertarian values and cultural attitudes in the service of electronically mediated global free trade – that is to say, what we now call neoliberalism. To be hegemonic, this compromise would eventually have to become seductive, as it did in the Eighties and Nineties. Yet it rested on brutally coercive foundations: in the late Sixties the FBI’s COINTELPRO program had broken the most virulent domestic resistance with covert intervention, mass incarceration and assassination, and then in the mid Seventies the CIA’s operation CONDOR helped install dictatorships across Latin America. This violent will to repress the nascent forces emerging from global civil society informs the analysis of institutional transformations that neocon sociologist Samuel Huntington contributed to the Trilateral’s 1975 investigation of The Crisis of Democracy. Focusing on the US (since Western Europe and Japan were covered by Michel Crozier and Joji Watanuki), Huntington describes the unforeseen consequences of welfare entitlements, mass education and access to media, all of which, from the elite point of view, had exacerbated the democratic process to a point of uncontrollability:

The vigor of democracy in the United States in the 1960s thus contributed to a democratic distemper, involving the expansion of governmental activity, on the one hand, and the reduction of governmental authority, on the other… Some of the problems of governance in the United States today stem from an excess of democracy – an ‘excess of democracy’ in much the same sense in which David Donald used the term to refer to the consequences of the Jacksonian revolution which helped to precipitate the Civil War. Needed, instead is a greater degree of moderation in democracy… In many situations the claims of expertise, seniority, experience and special talents may override the claims of democracy as a way of constituting authority… The effective operation of a democratic political system usually requires some measure of apathy and noninvolvement on the part of some individuals and groups… The American political system has emerged as a distinctive case of extraordinarily democratic institutions joined to an exclusively democratic value system. Democracy is more of a threat to itself in the United States than it is in either Europe or Japan… We have come to recognize that there are potentially desirable limits to economic growth. There are also potentially desirable limits to the indefinite extension of democracy.

What we need to understand today, in the midst of a new crisis of capitalism, is how the conclusions of statements like this can be drawn in institutional forms at multiple scales (metrpolitan, national, continental, global). Take for example the university, which had been the flashpoint of democratic dissent in Sixties. The deliberations of the 1975 Trilateral Committee meeting in this regard are revealed in Appendix A, indicating “Arenas for Action.” A section entitled “Reexamination of the Costs and Functions of Education” identifies the educational system as “the most important value-producing system in society.” Value, in the sociological sense intended here, means not only production and profit, but above all the way people see the world and orient their desires and their actions. The authors believed that after the turmoil of the Sixties there was no longer a good fit between the kinds of values that were produced in universities and those required to make society governable. They observe that “the overproduction of people with university education…. can create frustrations and psychological hardships among university graduates who are unable to secure the types of jobs to which they believe their education entitles them.” Here we can recognize Brzezinski’s diagnosis of intellectual alienation. Conceived as a structural feature of the expanded welfare state with its various cultural entitlements, this alienation and the militancy derived from it leads the Commission to frame the educational question as a choice between two paths:

What seems needed… is to relate educational planning to economic and political goals. Should a college education be provided generally because of its contribution to the overall cultural level of the populace and its possible relation to the constructive discharge of the responsibilities of citizenship? If this question is answered in the affirmative, a program is then necessary to lower the job expectations of those who receive a college education. If the question is answered in the negative, then higher educational institutions should be induced to redesign their programs so as to be geared to the patterns of economic development and future job opportunities.

It’s clear today that not the first, but rather the second option was taken in the United States in the course of the Eighties, and then gradually exported to the rest of the world. One key element of institutional renewal was the augmentation of university fees and the crorresponding offer of student loans, which bind the educated individual to a normalized professional career facilitating repayment. This was justified with the theory of human capital, developed at the University of Chicago in the late Fifties and early Sixties. According to this theory, it’s rational to invest in the development of one’s cognitive capacities, because education during one’s youth has been statistically proven to offer monetary returns throughout adult life. Another crucial institutional change was the Bayh-Dole Act, or “Patent and Trademark Law Amendments Act” of 1980. It allows individuals and institutions to patent discoveries arising from federally funded research. The act created a boom of highly profitable knowledge production at American research universities, which are now ringed with business incubators and start-up firms just waiting to be picked up by major corporations. Together these elements led to the development of the so-called “university of excellence.” This is corporate code for knowledge production as the driver of technological and organizational innovation, according to the precepts of the economist Joseph Schumpeter. The economic aim of knowledge production was to secure advantages in the competitive struggle between the Trilateral countries and their established or new competititors. But its sociopolitical function was to quell the dissent that arose from the “excess of democracy” in the Sixties and Seventies.

This short historical narrative reveals the deep neoliberal program, which has only recently been articulated in European universities through the so-called “Bologna process.” It does not derive from a simple opposition to government subsidy, as economic libertarians profess. Nor does it represent a simple takeover of specific university departments and funds by profit-seeking corporations and financiers, as some elements of the left maintain. Rather it is a broad and loosely coordinated program of strategic institutional change, whose goal is the reshaping of society as a whole. Educational institutions are, of course, just one crucial part of a larger constellation. Let’s try to grasp the full outlines of this strategic program, as it gradually emerged and cohered over the course of the Eighties in the US, and then throughout the world. Let’s try to understand the genesis of Neoliberal Informationalism.